The wildly popular app allows Tencent to channel 500 million
monthly active users to its entertainment services, a huge
consumer base for subscriptions or marketing - pay dirt for
media and advertising partners.

Combined with a willingness to throw cash at top-tier film,
television, game and music content, Tencent has locked down
exclusive deals with some of the biggest names in Hollywood,
eager to piggyback on the $190 billion Chinese group's growing
success.

Shenzhen-based Tencent, whose WeChat and QQ social networks
are as ubiquitous in China as Facebook Inc is elsewhere,
has spent billions of dollars in recent years building up its
content library and on stakes in entertainment firms, though the
company declines to give specific details on its investment.

Last month, Tencent added streaming rights to Twenty-First
Century Fox Inc's FOX, FOX Sports and the National
Geographic Channel to its media arsenal, which already includes
various rights for Sony Corp's Sony Music
Entertainment, Warner Music Group, Time Warner Inc's HBO
network and the U.S. National Basketball Association.

"We've paid aggressively to buy some of the most popular
content, the most established brands," Tencent's Chief Strategy
Officer James Mitchell told Reuters in a recent interview.

Founded 17 years ago by CEO Pony Ma, Tencent already
operates an online gaming business to rival those of Sony,
Microsoft Corp and Nintendo Co. It also owns
China's biggest music streaming service by subscribers, and by
some measures runs the country's most popular Internet video
platform.

The pairing of Tencent's active dealmaking with the success
of WeChat and QQ is critical, says Mathew Alderson, who leads
the China media and entertainment practice at Harris Moure in
Beijing. "I consider them to be ahead because of the reach and
sophistication of their social networking tools," he said.

The stakes are huge. Revenue in China's online entertainment
industry is set to double to more than $46 billion by 2018 for
online games and video streaming alone, according to iResearch
data, prompting China's biggest Internet companies to spend
lavishly on TV shows, films, games, music and sports rights.

"When we have the key content, our traffic makes it more
popular than it would otherwise be," said Mitchell, noting that
Tencent's online advertising business revenues jumped 65 percent
last year, to 8.3 billion yuan ($1.34 billion). Video
advertising revenue has at least doubled year-on-year in all of
the past six quarters.

Tencent reports January-March earnings later on Wednesday.

KNOWING THE SPACE

Alibaba, meanwhile, is flush with cash after its record $25
billion share sale in New York last year and, alongside its
affiliates, has spent more than $3.5 billion since the start of
2014 on stakes in video, music and gaming firms, including a
minority share of Youku Tudou Inc, one of China's
biggest Internet video services.

Alibaba's entertainment business claims music distribution
deals with Germany's BMG and two of Taiwan's biggest labels. It
has also teamed up with Hollywood studio Lions Gate
Entertainment Corp to offer a subscription streaming
service in China. Its operations are led by former members of
Tencent's video business, who left following a leadership
reshuffle around 2013. They include Patrick Liu, current head of
Alibaba's digital entertainment unit and former head of Tencent
Video.

Dealing with Tencent won't be easy, says Mark Natkin,
managing director of Beijing-based Marbridge Consulting. "They
understand what users want in terms of entertainment content,
they understand how to deliver it," he said. "Tencent knows that
space better than anybody."

Tencent's content library, which also includes South Korean
YouTube sensation Psy through a tie up with YG
Entertainment Inc, is arguably deeper than that of
its rivals.

"You clearly see the growth of (Tencent's) position," said
TCL Multimedia CEO Hao Yi, who works with many of China's
Internet companies, about the firm's video business. "A couple
of years ago they were nowhere. The WeChat thing, indeed, this
is a killer."

In recent months, Alibaba and Tencent have taken their
rivalry overseas, both setting up offices in Los Angeles to slug
it out for programming deals with Hollywood studios and
producers.

While both groups have financial firepower, WeChat could be
a clincher for Tencent in winning deals with content producers.

"You can use content to drive very good margins - if you
have the right pipes," said one Hollywood executive.